Exclusive-Weak bids in Citgo auction spurs Venezuela to pitch alternative pay plan

investing.com:

By Marianna Parraga

HOUSTON/MIAMI (Reuters) -The highest bid received in a U.S. auction of shares that will decide the fate of Venezuela-owned oil refiner Citgo Petroleum was $7.3 billion, enough to cover only a third of court-approved claims, two people familiar with the matter said.

A federal court in Delaware is auctioning the shares of a parent of Venezuela's foreign crown jewel, Houston-based Citgo, that it found liable for the South American country's debt defaults and expropriations. Creditors have flocked to Delaware to press claims totaling $21.3 billion in a case first brought nearly seven years ago by miner Crystallex.

Results from the first bidding round in January, however, show a sales process that is unlikely to provide a satisfactory outcome for creditors or Citgo's current owners. Offers received thus far in a case that broke new legal ground in sovereign immunity would leave many claims unpaid, analysts and sources warned.

The court may have to revamp the sales process, or consider an alternative being drafted by Venezuela, which would offer creditors a larger payout with proceeds spread over several years, while retaining some of Venezuela's stake in the company, the people said.

Judge Leonard Stark, who is overseeing the case, has declined to consider Venezuela's payment proposals, the people said. It is unclear if he would reconsider with the highest offer in the initial bidding round covering only 14 of the 26 claims that he has accepted from 18 creditors.

The weak initial bids were below the $13 billion to $14 billion value specialists appointed by the court had estimated for the shares. That shortfall is prompting Citgo's parent companies and boards to reprise an offer presented earlier this